In many households, having a dependent child can make you eligible to qualify for a hefty tax credit. To many new parents this may be a surprise, but it is crucial to plan for this so that you can acquire the most money possible. This tax credit that you may be eligible for is up to $1,000 per child. One of the many reasons why this is so beneficial is that it is not a tax deduction, but a tax credit. The difference between a tax credit and a tax deduction is a house credit minimizes your tax bill by dollar amounts. Having one child will qualify you for a full $1,000 from the money you owe the IRS. Having more children, such as 3, will qualify you for $3,000.
Claiming the Child Tax Credit
In order to be eligible for the credit, there are a few tests that must be passed. The dependent you are claiming must either be a resident or a citizen of the United States and under the age of 17 by the end of the tax year. You have the possibility of claiming your stepchild, child, adopted child, great grandchild, or grandchild.
If the court or authorized agency placed you with a foster child, you may also be eligible for the tax credit. It is also required for the child to reside with you for a minimum of a year and a half while you are trying to claim the credit. The child must not provide more than half of his/her own support, which is generally only the case for older dependents.
Supplementary Child Tax Credit
If you did not receive the complete refund of the child tax, you have the possibility to qualify for the additional child tax credit. Even when you do not have a tax liability, you have the possibility to get a refund because it is a refundable credit.
Additional child tax credit has the same income and qualifying guidelines. If your income is higher than $3,000, you have the possibility to be eligible for this additional child tax credit amount up to the Social Security taxes that are paid throughout the tax year.
Additionally, if you are eligible for the earned income tax credit, the additional child tax credit that was established on Social Security taxes will be decreased by the received earned income credit.